Under the gross roll-up regime introduced in Finance Act 2000, investments in life assurance policies may accumulate without the imposition of tax. However, an exit tax applies to the income or gains arising when a chargeable event occurs, such as the receipt of payments from, or the disposal of investments in a life policy, or the ending of each 8-year period following the acquisition of that policy (i.e. a deemed disposal). The rate of exit tax applying depends on when the chargeable event, including a deemed disposal, occurs. The exit tax up to 1 January 2009 was the standard rate of income tax (20%) plus 3% i.e. 23%, which increased to 26% (20% +6%) from January 2009 until 8 April 2009 when the rate was further increased to 28%. The Finance Bill 2011 provides for a rate of 30% to apply from 1 January 2011.
I am advised by the Revenue Commissioners that it is unclear from the documentation provided whether the policy in question was encashed before the first guarantee date of 22 February 2009. However, the above information should be of assistance as regards the exit tax applying on any chargeable event arising. The Revenue Commissioners have also advised that, on receipt of documentation issued by the insurance company outlining any tax deducted, further clarification will be provided.